VIAVI SOLUTIONS INC. - Annual Report: 2020 (Form 10-K)

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•	Our expectations regarding the impact of the COVID-19 pandemic on our business, financial condition, results of operations and liquidity;

•	Our expectations regarding demand for our products and services, including industry trends and technological advancements that may drive such demand, the role we will play in those advancements and our ability to benefit from such advancements;

•	Our plans for growth and innovation opportunities;

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Financial projections and expectations, including profitability of certain business units, plans to reduce costs and improve efficiencies, the effects of seasonality on certain business units, continued reliance on key customers for a significant portion of our revenue, future sources of revenue, competition and pricing pressures, the future impact of certain accounting pronouncements and our estimation of the potential impact and materiality of litigation;

•	Our plans for continued development, use and protection of our intellectual property;

•	Our strategies for achieving our current business objectives, including related risks and uncertainties;

•	Our plans or expectations relating to investments, acquisitions, partnerships and other strategic opportunities;

•	Our strategies for mitigating the risk of supply chain interruptions;

•	Our research and development plans and the expected impact of such plans on our financial performance; and

•	Our expectations related to our products, including costs associated with the development of new products, product yields, quality and other issues.

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•	Network Enablement (NE);

•	Service Enablement (SE); and

•	Optical Security and Performance Products (OSP)

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•	Market leadership in physical and virtualized test and measurement instruments with opportunity to grow market share;

•	Market leadership in Anti-Counterfeiting pigments, 3D sensing optical filters and Engineered DiffusersTM;

•	Market leadership in 5G wireless, public safety radio and navigation/communication transponder test instruments;

•	Increase the benefit from the use of our net operating loss carryforwards (NOL) by improving our profitability organically and inorganically; and,

•	Greater flexibility in capital structure enabling greater capital return to shareholders.

•	Maintenance and run-rate investments to support operations;

•	Organic investments in initiatives to support revenue growth and productivity;

•	Return capital to shareholders through share buybacks; and,

•	Mergers and acquisitions that are synergistic to company strategy and business segments.

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•	uncertain future telecom carrier and cable operator capital and R&D spending levels, which particularly affects our NE and SE segments;

•	adverse changes to our product mix, both fundamentally (resulting from new product transitions, the declining profitability of certain legacy products and the termination of certain products with declining margins, among other things) and due to quarterly demand fluctuations;

•	pricing pressure across our NSE product lines due to competitive forces, increasingly from Asia, and to a highly concentrated customer base for many of our product lines, which may offset some of the cost improvements;

•	our OSP operating margin may experience some downward pressure as a result of higher mix of 3D sensing products and increased operating expenses;

•	limited availability of components and resources for our products which leads to higher component prices;

•	increasing commoditization of previously differentiated products, and the attendant negative effect on average selling prices and profit margins;

•	execution challenges, which limit revenue opportunities and harm profitability, market opportunities and customer relations;

•	decreased revenue associated with terminated or divested product lines;

•	redundant costs related to periodic transitioning of manufacturing and other functions to lower-cost locations;

•	ongoing costs associated with organizational transitions, consolidations and restructurings, which are expected to continue in the nearer term;

•	continuing high levels of selling, general and administrative, (SG&A) expenses;

•	cyclical demand for our currency products;

•	changing market and economic conditions, including the impacts due to tariffs and the COVID-19 pandemic;

•	ability of our customers, partners, manufacturers and suppliers to purchase, market, sell, manufacture or supply our products and services, including as a result of disruptions arising from the COVID-19 pandemic;

•	financial stability of our customers, including the solvency of private sector customers, which may be impacted by the COVID-19 pandemic and statutory authority for government customers to purchase goods and services; and

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factors beyond our control resulting from public health epidemics, pandemics and similar outbreaks as well as the fear of exposure to a widespread health epidemic, such as the COVID-19 pandemic, manufacturing restrictions, travel restrictions and shelter-in-place orders to control the spread of a disease regionally and globally, and limitations on the ability of our employees and our suppliers’ and customers’ employees to work and travel.

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Our continuing cost reduction programs, which include site and organization consolidations, asset divestitures, outsourcing the manufacture of certain products to contract manufacturers, other outsourcing initiatives, and reductions in employee headcount, require the re-establishment and re-qualification by our customers of complex manufacturing lines, as well as modifications to systems, planning and operational infrastructure. During this process, we have experienced, and may continue to experience, additional costs, delays in re-establishing volume production levels, planning difficulties, inventory issues, factory absorption concerns and systems integration problems.

•	We have experienced variability of manufacturing yields caused by difficulties in the manufacturing process, the effects from a shift in product mix, changes in product specifications and the introduction of new product lines. These difficulties can reduce yields or disrupt production and thereby increase our manufacturing costs and adversely affect our margin.

•	We may incur significant costs to correct defective products (despite rigorous testing for quality both by our customers and by us), which could include lost future sales of the affected product and other products, and potentially severe customer relations problems, litigation and damage to our reputation.

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We are dependent on a limited number of vendors, who are often small and specialized, for raw materials, packages and standard components. We also rely on contract manufacturers around the world to manufacture certain of our products. Our business and results of operations have been, and could continue to be, adversely affected by this dependency. Specific concerns we periodically encounter with our suppliers include stoppages or delays of supply, insufficient vendor resources to supply our requirements, substitution of more expensive or less reliable products, receipt of defective parts or contaminated materials, increases in the price of supplies and an inability to obtain reduced pricing from our suppliers in response to competitive pressures. Additionally, the ability of our contract manufacturers to fulfill their obligations may be affected by economic, political or other forces that are beyond our control, including the COVID-19 pandemic. Any such failure could have a material impact on our ability to meet customers’ expectations and may materially impact our operating results.

•	New product programs and introductions involve changing product specifications and customer requirements, unanticipated engineering complexities, difficulties in reallocating resources and overcoming resource limitations and with their increased complexity, which expose us to yield and product risk internally and with our suppliers.

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the impact of the recent COVID-19 pandemic, and any other adverse public health developments, epidemic disease or other pandemic in the countries in which we operate or our customers are located, including regional quarantines restricting the movement of people or goods, reductions in labor supply or staffing, the closure of facilities to protect employees, including those of our customers, disruptions to global supply chains and our and our suppliers’ ability to deliver materials and products on a timely or cost-effective basis, shipment, acceptance or verification delays, the resulting overall significant volatility and disruption of financial markets, and economic instability affecting customer spending patterns;

•	inadequate internal control procedures and disclosure controls to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or poor integration of a target company’s or business’s procedures and controls;

•	diversion of management’s attention from normal daily operations of the business;

•	potential difficulties in completing projects associated with in-process R&D;

•	difficulties in entering markets in which we have no or limited prior experience and where competitors have stronger market positions;

•	difficulties in obtaining or providing sufficient transition services and accurately projecting the time and cost associated with providing these services;

•	an acquisition may not further our business strategy as we expected or we may overpay for, or otherwise not realize the expected return on, our investments;

•	expected earn-outs may not be achieved in the time frame or at the level expected or at all;

•	we may not be able to recognize or capitalize on expected growth, synergies or cost savings;

•	insufficient net revenue to offset increased expenses associated with acquisitions;

•	potential loss of key employees of the acquired companies; and

•	difficulty in forecasting revenues and margins.

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•	issue common stock that would dilute our current stockholders’ percentage ownership and may decrease earnings per share;

•	assume liabilities, some of which may be unknown at the time of the acquisitions;

•	record goodwill and non-amortizable intangible assets that will be subject to impairment testing and potential periodic impairment charges;

•	incur additional debt to finance such acquisitions;

•	incur amortization expenses related to certain intangible assets; or

•	acquire, assume, or become subject to litigation related to the acquired businesses or assets.

•	fluctuations in exchange rates between the U.S. dollar and among the currencies of the countries in which we do business may adversely affect our operating results by negatively impacting our revenues or increasing our expenses;

•	our ability to comply with a wide variety of laws and regulations of the countries in which we do business, including, among other things, customs, import/export, anti-bribery, anti-competition, tax and data privacy laws, which may be subject to sudden and unexpected changes;

•	difficulties in establishing and enforcing our intellectual property rights;

•	tariffs and other trade barriers;

•	political, legal and economic instability in foreign markets, particularly in those markets in which we maintain manufacturing and product development facilities;

•	strained or worsening relations between the United States and China or other countries;

•	difficulties in staffing and management;

•	language and cultural barriers;

•	seasonal reductions in business activities in the countries where our international customers are located;

•	integration of foreign operations;

•	longer payment cycles;

•	difficulties in management of foreign distributors; and

•	potential adverse tax consequences.

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(1)	During the third quarter of fiscal 2020, the Company recorded a tax provision of $31.6 million for withholding taxes related to the planned repatriation of cash from a foreign subsidiary to US, of which $19.4 million was paid in fiscal 2020.

(2)	During fiscal 2020, the Company recorded a gain on change in fair value of RPC related earn-out liability of $29.5 million. Refer to “Note 8. Fair Value Measurements” for more information.

(3)	Reflects the impact of the adoption of the new lease accounting standard (ASC 842) in fiscal year 2020.

(4)

During the second quarter of fiscal 2019 we acquired RPC. During the fourth quarter of fiscal 2019 we acquired 3Z Telecom, Inc. Both transactions were accounted for as business combinations. The Consolidated Statement of Operations for fiscal 2019 includes the results of the acquired businesses subsequent to the respective acquisition dates. The Consolidated Balance Sheet as of June 29, 2019 includes the acquired businesses’ financial position. Refer to “Note 5. Acquisitions” for more information.

(5)	Fiscal 2018 and 2017 have been adjusted for our retrospective adoption of the new revenue recognition accounting standard (ASC 606).

(6)

During the first quarter of fiscal 2018 we acquired Trilithic Inc. During the third quarter of fiscal 2018 we acquired the AvComm and Wireless businesses of Cobham plc. Both transactions were accounted for as business combinations. The Consolidated Statement of Operations for fiscal 2018 and fiscal 2019 includes the results of the acquired businesses subsequent to the respective acquisition dates. The Consolidated Balance Sheet as of June 30, 2018 includes the acquired businesses’ financial position. Refer to “Note 5. Acquisitions” for more information.

(7)	During fiscal years ended 2017 and 2016, we recorded $203.0 million and $71.5 million, respectively, gross realized gains on the sale of Lumentum common stock that was retained as part of the Separation.

(8)	During the fourth quarter of fiscal 2016, we recorded a $91.4 million goodwill impairment charge related to the SE reporting unit in the Consolidated Statements of Operations.

(9)	During the first quarter of fiscal 2016, we completed the separation of Lumentum. Operations of Lumentum have been presented as discontinued operations in all periods of our Consolidated Statements of Operations.

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•	Products: NE and SE products include instruments, microprobes and perpetual software licenses that support the development, production, maintenance and optimization of network systems. Our OSP products include proprietary pigments used for optical security and optical filters used in commercial and government 3D Sensing applications.

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Services: We also offer a range of product support and professional services designed to comprehensively address customer requirements. These include repair, calibration, extended warranty, software support, technical assistance, training and consulting services. Implementation services provided in conjunction with hardware or software solution projects include sale of the products along with project management, set-up and installation.

1.

Identify the contract with a customer: Generally, we consider customer purchase orders which, in some cases are governed by master sales or other purchase agreements, to be the customer contract. All of the following criteria must be met before we consider an agreement to qualify as a contract with a customer under the revenue standard: (i) it must be approved by all parties; (ii) each party’s rights regarding the goods and services to be transferred can be identified; (iii) the payment terms for the goods and services can be identified; (iv) the customer has the ability and intent to pay and collection of substantially all of the consideration is probable; and, (v) the agreement has commercial substance. We exercise reasonable judgment to determine the customer’s ability and intent to pay, which is based upon various factors including the customer’s historical payment experience or credit and financial information and credit risk management measures that we implement.

2.

Identify the performance obligations in the contract: We assess whether each promised good or service is distinct for the purpose of identifying the various performance obligations in each contract. Promised goods and services are considered distinct provided that: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and (ii) our promise to transfer the good or service to the customer is separately identifiable or distinct from other promises in the contract. Our performance obligations consist of a variety of products and services offerings, which include networking equipment; proprietary pigment; optical filters; proprietary software licenses; and support and maintenance, which includes hardware support that extends beyond our standard warranties, software maintenance, installation, professional and implementation services, and training.

3.

Determine the transaction price: Transaction price reflects the amount of consideration to which we expect to be entitled in exchange for transferring goods or services to the customer. Our contracts may include terms that could cause variability in the transaction price including rebates, sales returns, market incentives and volume discounts. Variable consideration is generally accounted for at the portfolio level and estimated based on historical information. If a contract includes a variable amount, the price adjustments are estimated at contract inception. In both cases, estimates are updated at the end of each reporting period as additional information becomes available.

4.

Allocate the transaction price to performance obligations in the contract: If the contract contains a single performance obligation, the entire transaction price is allocated to that performance obligation. Many of our contracts include multiple performance obligations with a combination of distinct products and services, maintenance and support, professional services and/or training. Contracts may also include rights or options to acquire future products and/or services, which are accounted for as separate performance obligations by us, only if the right or option provides the customer with a material right that it would not receive without entering into the contract. For contracts with multiple performance obligations, we allocate the total transaction value to each distinct performance obligation based on relative standalone selling price (SSP). Judgment is required to determine the SSP for each distinct performance obligation. The best evidence of SSP is the observable price of a good or service when we sell that good or service separately under similar circumstances to similar customers. If a directly observable price is not available, the SSP must be estimated based on multiple factors including, but not limited to, historical pricing practices, internal costs, and profit objectives as well as overall market conditions.

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5.

Recognize revenue when (or as) performance obligations are satisfied: Revenue is recognized at the point in time control is transferred to the customer. For hardware sales, transfer of control to the customer typically occurs at the point the product is shipped or delivered to the customer’s designated location. For software license sales, transfer of control to the customer typically occurs upon shipment, electronic delivery, or when the software is available for download by the customer. For sales of implementation service and solution contracts or in instances where software is sold along with essential installation services, transfer of control occurs and revenue is typically recognized upon customer acceptance. In certain instances, acceptance is deemed to have occurred if all acceptance provisions lapse, or if we have evidence that all acceptance provisions will be, or have been, satisfied. For fixed-price support and extended warranty contracts, or certain software arrangements, which provide customers with a right to access over a discrete period, control is deemed to transfer over time and revenue is recognized on a straight-line basis over the contract term due to the stand-ready nature of the performance obligation. Revenue from hardware repairs and calibration services outside of an extended warranty or support contract is recognized at the time of completion of the related service. For other professional services or time-based labor contracts, revenue is recognized as we perform the services and the customers receive and/or consume the benefits.

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i.

During the fourth quarter of fiscal 2020, we updated our NSE, including AW Restructuring plan to include additional headcount to further drive operational improvement consistent with the original plan. As a result, a net restructuring charge of $3.5 million, for approximately 60 employees primarily in R&D and SG&A functions located in North America, Europe and Asia was recorded in the year ended June 27, 2020. Payments related to the severance and benefits accrual are expected to be paid by the end of the fourth quarter of fiscal 2021.

i.

During the first quarter of fiscal 2019, Management approved restructuring and workforce reduction plans within our Network Service and Enablement (NSE) business, including actions related to the recently acquired AW business (NSE, including AW Restructuring plan). These actions further drive our strategy for organizational alignment and consolidation as part of our continued commitment to a more cost effective and agile organization and to improve overall profitability of the NSE business. Included in these restructuring plans are specific actions to consolidate and integrate the newly acquired AW business within the NSE business segment. During the third quarter of fiscal 2019, we updated the plan to include additional headcount primarily to transfer a portion of the manufacturing operations related to the recently acquired AW business to a contract manufacturer. As a result, a total restructuring charge of $16.1 million, for approximately 240 employees primarily in manufacturing, R&D and SG&A functions located in North America, Latin America, Europe and Asia was recorded in the year ended June 29, 2019. Payments related to the severance and benefits accrual are expected to be paid by the end of the fourth quarter of fiscal 2020.

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•	global economic conditions which affect demand for our products and services and impact the financial stability of our suppliers and customers;

•	impact of the COVID-19 pandemic on our financial condition;

•	changes in accounts receivable, inventory or other operating assets and liabilities which affect our working capital;

•	increase in capital expenditure to support the revenue growth opportunity of our business;

•	changes in customer payment terms and patterns, which typically results in customers delaying payments or negotiating favorable payment terms to manage their own liquidity positions;

•	timing of payments to our suppliers;

•	factoring or sale of accounts receivable;

•	volatility in fixed income and credit market which impact the liquidity and valuation of our investment portfolios;

•	volatility in foreign exchange market which impacts our financial results;

•	possible investments or acquisitions of complementary businesses, products or technologies;

•	issuance or repurchase of debt or equity securities, which may include open market purchases of our 2023 Notes and/or 2024 Notes prior to their maturity or of our common stock;

•	potential funding of pension liabilities either voluntarily or as required by law or regulation;

•	compliance with covenants and other terms and conditions related to our financing arrangements;

•	and the risks and uncertainties detailed in Item 1A “Risk Factors” section of our Annual Report on Form 10-K.

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(1)	Refer to “Note 18. Commitments and Contingencies” for more information.

(2)	Refer to “Note 12. Leases” for more information.

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(3)	Refer to “Note 17. Employee Pension and Other Benefit Plans” for more information.

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⁽¹⁾ These amounts include both current and non-current balances of restricted cash totaling $8.9 million, $12.9 million and $18.0 million as of June 29, 2019, June 30, 2018 and July 1, 2017, respectively.

⁽²⁾ These amounts include both current and non-current balances of restricted cash totaling $8.4 million, $8.9 million and $12.9 million as of June 27, 2020, June 29, 2019 and June 30, 2018, respectively.

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•	Level 1: Quoted market prices for identical instruments in active markets for identical assets or liabilities.

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Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in less active markets or model-derived valuations. All significant inputs used in the Company’s valuations, such as discounted cash flows, are observable or derived from or corroborated with observable market data for substantially the full term of the assets or liabilities.

•	Level 3: Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities. Level 3 inputs and valuation models are monitored and reviewed by the Company to help ensure the fair value measurements are reasonable and consistent with market experience in similar asset classes.

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Products: Network Enablement (NE) and Service Enablement (SE) products include instruments, microprobes and perpetual software licenses that support the development, production, maintenance and optimization of network systems. NE and SE are collectively referred to as Network and Service Enablement (NSE). The Company’s Optical Security and Performance (OSP) products include proprietary pigments used for optical security and optical filters used in commercial and government 3D Sensing applications.

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Services: The Company also offers a range of product support and professional services designed to comprehensively address customer requirements. These include repair, calibration, extended warranty, software support, technical assistance, training and consulting services. Implementation services provided in conjunction with hardware or software solution projects include sale of the products along with project management, set-up and installation.

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1.

Identify the contract with a customer: Generally, the Company considers customer purchase orders which, in some cases are governed by master sales or other purchase agreements, to be the customer contract. All of the following criteria must be met before the Company considers an agreement to qualify as a contract with a customer under the revenue standard: (i) it must be approved by all parties; (ii) each party’s rights regarding the goods and services to be transferred can be identified; (iii) the payment terms for the goods and services can be identified; (iv) the customer has the ability and intent to pay and collection of substantially all of the consideration is probable; and, (v) the agreement has commercial substance. The Company utilizes judgment to determine the customer’s ability and intent to pay, which is based upon various factors including the customer’s historical payment experience or credit and financial information and credit risk management measures implemented by the Company.

2.

Identify the performance obligations in the contract: The Company assesses whether each promised good or service is distinct for the purpose of identifying the various performance obligations in each contract. Promised goods and services are considered distinct provided that: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and (ii) the Company's promise to transfer the good or service to the customer is separately identifiable or distinct from other promises in the contract. The Company's performance obligations consist of a variety of products and services offerings which include networking equipment; proprietary pigment, optical filters, proprietary software licenses; support and maintenance which includes hardware support that extends beyond the Company's standard warranties, software maintenance, installation, professional and implementation services, and training.

3.

Determine the transaction price: Transaction price reflects the amount of consideration to which the Company expects to be entitled in exchange for transferring goods or services to the customer. The Company’s contracts may include terms that could cause variability in the transaction price including rebates, sales returns, market incentives and volume discounts. Variable consideration is generally accounted for at the portfolio level and estimated based on historical information. If a contract includes a variable amount, the price adjustments are estimated at contract inception. In both cases, estimates are updated at the end of each reporting period as additional information becomes available.

4.

Allocate the transaction price to performance obligations in the contract: If the contract contains a single performance obligation, the entire transaction price is allocated to that performance obligation. Many of the Company’s contracts include multiple performance obligations with a combination of distinct products and services, maintenance and support, professional services and/or training. Contracts may also include rights or options to acquire future products and/or services, which are accounted for as separate performance obligations by the Company, only if the right or option provides the customer with a material right that it would not receive without entering into the contract. For contracts with multiple performance obligations, the Company allocates the total transaction value to each distinct performance obligation based on relative standalone selling price (SSP). Judgment is required to determine the SSP for each distinct performance obligation. The best evidence of SSP is the observable price of a good or service when the Company sells that good or service separately under similar circumstances to similar customers. If a directly observable price is not available, the SSP must be estimated based on multiple factors including, but not limited to, historical pricing practices, internal costs, and profit objectives as well as overall market conditions.

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5.

Recognize revenue when (or as) performance obligations are satisfied: Revenue is recognized at the point in time control is transferred to the customer. For hardware sales, transfer of control to the customer typically occurs at the point the product is shipped or delivered to the customer’s designated location. For software license sales transfer of control to the customer typically occurs upon shipment, electronic delivery, or when the software is available for download by the customer. For sales of implementation service and solution contracts or in instances where software is sold along with essential installation services, transfer of control occurs and revenue is typically recognized upon customer acceptance. In certain instances, acceptance is deemed to have occurred if all acceptance provisions lapse, or if the Company has evidence that all acceptance provisions will be, or have been, satisfied. For fixed-price support and extended warranty contracts, or certain software arrangements which provide customers with a right to access over a discrete period, control is deemed to transfer over time and revenue is recognized on a straight-line basis over the contract term due to the stand-ready nature of the performance obligation. Revenue from hardware repairs and calibration services outside of an extended warranty or support contract is recognized at the time of completion of the related service. For other professional services or time-based labor contracts, revenue is recognized as the Company performs the services and the customers receive and/or consume the benefits.

•	Revenue-based taxes as assessed by governmental authorities have been excluded from the measurement of transaction price(s).

•	Shipping and handling activities performed after the customer obtains control of the good are treated as activities to fulfill the promise (cost of fulfillment). Therefore, the Company does not evaluate whether the shipping and handling activities are promised services.

•	Incremental costs of obtaining contracts that would have been recognized within one year or less are recognized as an expense when incurred. These costs are included in SG&A expense. The costs of obtaining contracts where the amortization period for recognition of the expense is beyond a year are capitalized and recognized over the revenue recognition period of the original contract.

•	The portfolio approach is used for certain types of variable consideration for contracts with similar characteristics. The methodology is used when the effects on the financial statements of applying this guidance to the portfolio would not differ materially from applying this guidance to the individual contracts within that portfolio.

•	If at contract inception, the expected period between the transfer of promised goods or services and payment is within one year or less, the Company forgoes adjustment for the impact of significant financing component for the contract.

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(1)

Represents the number of shares that would be issued if the Company’s Senior Convertible Notes had been converted. The par amount of the Company’s convertible notes is payable in cash equal to the principal amount of the notes plus any accrued and unpaid interest and the “in-the money” conversion benefit feature above the conversion price is payable in cash, shares of the Company’s common stock or a combination of both, at the Company’s election.

(1)	As the Company incurred a net loss from continuing operations in the period, potential dilutive securities from employee stock options, ESPP, RSUs , PSUs and MSUs have been excluded from the diluted net loss per share computations as their effects were deemed anti-dilutive.

(2)

The Company’s 0.625% Senior Convertible Notes due 2033 are not included in the table above. The par amount of convertible notes is payable in cash equal to the principal amount of the notes plus any accrued and unpaid interest and then the “in-the-money” conversion benefit feature at the conversion price above $11.28 per share is payable in cash, shares of the Company’s common stock or a combination of both at the Company’s election. In October 2018, the 2033 Notes were fully redeemed and any potential dilution effect of the Notes was realized upon the Company settling the “in-the-money” conversion benefit feature of the Notes with shares of common stock. Refer to “Note 11. Debt” for more details.

(3)	The Company’s 1.00% Senior Convertible Notes due 2024 are not included in the table above. The par amount of convertible notes is payable in cash equal to the principal amount of the notes plus any accrued and unpaid interest and then the “in-the-money” conversion benefit feature at the conversion

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(4)

The Company’s 1.75% Senior Convertible Notes due 2023 are not included in the table above. The par amount of convertible notes is payable in cash equal to the principal amount of the notes plus any accrued and unpaid interest and then the “in-the-money” conversion benefit feature at the conversion price above $13.94 per share is payable in cash, shares of the Company’s common stock or a combination of both at the Company’s election. Refer to “Note 11. Debt” for more details.

(1)

Activity before reclassifications to the Consolidated Statements of Operations during the fiscal year ended June 27, 2020 primarily relates to unrealized loss from available-for-sale securities. The amount reclassified out of accumulated other comprehensive (loss) income represents the gross realized loss from available-for-sale securities included as “Interest and other income, net" in the Consolidated Statement of Operations for the year ended June 27, 2020. There was no tax impact for fiscal year 2020.

(2)

Activity before reclassifications to the Consolidated Statements of Operations during the fiscal year ended June 27, 2020 relates to the unrealized actuarial loss of $5.7 million, net of income tax benefit of $0.3 million. The amount reclassified out of accumulated other comprehensive (loss) income represents the amortization of actuarial losses included as a component of SG&A in the Consolidated Statement of Operations for the year ended June 27, 2020. Refer to “Note 17. Employee Pension and Other Benefit Plans” for more details on the computation of net periodic cost for pension plans.

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(1)	Included in these amounts is the impact from foreign currency exchange rate fluctuations.

(2)	Revenue recognized during the period represents releases from the balance at the beginning of the period as well as releases from the following period quarter-end deferrals.

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(1)	See “Note 5. Acquisitions” of the Notes to Consolidated Financial Statements for detail of acquisition.

(2)	Represents the effect of currency translation adjustments and write-offs of uncollectible accounts, net of recoveries.

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(1)	See “Note 5. Acquisitions” and “Note 7. Investments and Forward Contracts” of the Notes to the Company’s Consolidated Financial Statements for more detail.

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(1)	In connection with the debt extinguishment, a loss of $5.0 million was recognized in fiscal 2018. Refer to “Note 11. Debt” for more information.

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(1)	$2.2 million and $1.2 million in prepayments and other current assets on the Company’s Consolidated Balance Sheets as of June 27, 2020 and June 29, 2019, respectively.

(2)

Includes as of June 27, 2020, $327.2 million in cash and cash equivalents, $1.4 million in short-term investments, $3.4 million in restricted cash, $2.2 million in prepayments and other current assets, and $4.5 million in other non-current assets on the Company’s Consolidated Balance Sheets. Includes as of June 29, 2019, $315.5 million in cash and cash equivalents, $1.5 million in short-term investments, $3.5 million in restricted cash, $1.2 million in prepayments and other current assets and $4.5 million in other non-current assets on the Company’s Consolidated Balance Sheets.

(3)	Includes $1.5 million and $4.0 million in other current liabilities on the Company’s Consolidated Balance Sheets as of June 27, 2020 and June 29, 2019, respectively.

(4)	Includes $9.4 million and $37.7 million in other non-current liabilities and $0.5 million and $0.7 million in other current liabilities as of June 27, 2020 and June 29, 2019, respectively.

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(1)	See Note 5. Acquisitions and of the Notes to the Company’s Consolidated Financial Statements for more detail.

(1)	Gross goodwill balances for NE, SE and OSP were $629.9 million, $272.6 million and $92.8 million, respectively as of June 30, 2018. Accumulated impairment for NE, SE and OSP was $301.9 million, $272.6 million and $84.5 million, respectively as of June 30, 2018.

(2)	See “Note 5. Acquisitions” of the Notes to Consolidated Financial Statement for additional information related to the Company’s acquisitions.

(3)	Gross goodwill balances for NE, SE and OSP were $640.8 million, $272.6 million and $126.7 million, respectively as of June 29, 2019. Accumulated impairment for NE, SE and OSP was $301.9 million, $272.6 million and $84.5 million, respectively as of June 29, 2019.

(4)	Gross goodwill balances for NE, SE and OSP were $636.8 million, $276.9 million and $126.7 million, respectively as of June 27, 2020. Accumulated impairment for NE, SE and OSP was $301.9 million, $272.6 million and $84.5 million, respectively as of June 27, 2020.

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(1)	Other intangibles consist of customer backlog, non-competition agreements, patents, proprietary know-how and trade secrets, trademarks and trade names.

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(1)	Included in additional paid-in-capital on the Consolidated Balance Sheets.

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•	on any date during any calendar quarter beginning after September 30, 2018 (and only during such calendar quarter) if the closing price of the Company’s common stock was more than 130% of the then current conversion price for at least 20 trading days during the 30 consecutive trading-day period ending the last trading day of the previous calendar quarter;

•	upon the occurrence of specified corporate events;

•	if the Company is party to a specified transaction, a fundamental change or a make-whole fundamental change (each as defined in the indenture of the 2023 Notes); or

•	during the five consecutive business-day period immediately following any ten consecutive trading-day period in which the trading price per $1,000 principal amount of the 2023 Notes for each day of such ten consecutive trading-day period was less than 98% of the product of the closing sale price of the Company’s common stock and the applicable conversion rate on such date.

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(1)	Plan includes workforce reduction cost.

(2)	Other adjustments including $0.2 million lease liability reclassification to Operating lease liability upon ASC 842 adoption.

(3)	$6.5 million and $8.6 million in other current liabilities on the Consolidated Balance Sheets as of June 27, 2020 and June 29, 2019, respectively. $0.2 million in other non-current liabilities on the Consolidated Balance Sheets as of June 29, 2019.

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(1)	Additions include current year additions charged to expenses and current year build due to increases in net deferred tax assets, return to provision true-ups, other adjustments.

(2)	Deductions include current year releases credited to expenses and current year reductions due to decreases in net deferred tax assets, return to provision true-ups, other adjustments and increases in deferred tax liabilities.

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(1)	Performance Shares refer to the Company’s MSU and PSU awards, where the actual number of shares awarded upon vesting may be higher or lower than the target amount depending on the achievement of the relevant market conditions and performance goal achievement. The majority of MSUs vest

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(1)	During the years ended June 27, 2020, other charges unrelated to core operating performance primarily consisted of $1.4 million in acquisition related costs.

(2)	During the years ended June 29, 2019, other charges unrelated to core operating performance primarily consisted of $5.0 million in acquisition related costs.

(3)	During the years ended June 30, 2018, other charges unrelated to core operating performance primarily consisted of a $12.7 million in acquisition related costs and $12.4 million in amortization of inventory step-up.

(4)	Refer to “Note 8. Fair Value Measurements” for further detail.

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(1)	Net income (loss) per share is computed independently for each of the fiscal quarters presented. Therefore, the sum of the quarterly basic and diluted net income (loss) per share amounts may not equal the annual basic and diluted net income (loss) per share amount for the full fiscal years.

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(a)	The following items are filed as part of this Annual Report on Form 10-K:

(1)	Financial Statements:

(2)	Financial Statement Schedules: All financial statement schedules have been omitted because the required information is not present in amounts sufficient to require submission of the schedule, not applicable, or because the required information is included in the Consolidated Financial Statements or Notes thereto.

(3)	Exhibits:

(b)	Exhibits:

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